VW takes new €2.5bn hit over diesel scandal as engineer arrested

Volkswagen added provisions of around €2.5 billion on Friday to the mounting total from its diesel emissions scandal, which has already cost the company around €20 billion.

In an ad-hoc statement on Friday it said the “repurchase/retrofit” programme for 2.0-litre vehicles required an increase in provisions because it was “considerably more lengthy and technically more demanding” than anticipated.

Its shares dropped after the statement and were down 3.1 per cent, at the bottom of the German blue-chip DAX index, which was up 0.2 per cent.

Volkswagen said the extra provisions would be reflected in its third-quarter operating results, which are due to be published on October 27th.

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The announcement also coincided with reports that another former senior engineer has been arrested by authorities investigating the scandal.

The executive, identified by German news outlets as Wolfgang Hatz, is a former chief of engine development at Volkswagen. Hatz was being held in Munich without bail.

He worked closely with Matthias Müller, now the company's chief executive, when both were members of the management board of the carmaker's Porsche unit. Hatz was chief of research and development at Porsche while Müller was chief executive of Porsche.

Hatz is well known in automotive circles because of his previous role as chief of research and development at Porsche, and is the second person to be arrested in Germany in connection with the VW emissions case and the first German citizen.

His prominence signals that the investigation – which has proceeded slowly since the wrongdoing came to light two years ago – may be entering a more intense phase.

The Munich state attorney's office is taking the lead in investigating reported wrongdoing at Audi, while Braunschweig prosecutors are investigating the parent company.

Volkswagen has pleaded guilty to charges in the United States, admitting that it programmed 600,000 Volkswagen and Audi diesel vehicles to deliver permissible emissions only when the car's engine software detected that a test was under way.

At other times they emitted more harmful nitrogen oxides than a modern long-haul truck. But Volkswagen has continued to insist that members of its management board, including Müller, had no knowledge of the illegal software until shortly before the scandal came to light in September 2015. – (Reuters/New York Times)